WisdomTree, Inc. Q1 FY2021 Earnings Call

Good day, and thank you for standing by. Welcome to WisdomTree's first quarter earnings call. Please be advised that today's conference may be recorded. I'd now like to hand the conference over to your speaker today, Jessica Zaloom, WisdomTree's Head of Corporate Communication.

Good morning. Before we begin, I would like to reference our legal disclaimer available in today's presentation. This presentation may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. A number of factors could cause actual results to differ materially from the results discussed in forward-looking statements, including, but not limited to, the risks set forth in this presentation and in the Risk Factors section of WisdomTree's annual report on Form 10-K for the year ended December 31, 2020. WisdomTree assumes no duty and does not undertake to update any forward-looking statements. Now it is my pleasure to turn the call over to WisdomTree's CFO, Amit Muni.

Thank you, Jess, and good morning, everyone. I'll walk through the highlights for the quarter, then turn the call over to our President, Jarrett Lilien, who will provide some perspective on our successes this quarter; and then to Jono for his closing remarks before we open the lines for Q&A. So beginning on Slide 2. This was one of our best quarters as reflected by our strong operating and financial results. We ended the quarter with assets under management of $69.5 billion, up 3% from positive inflows and market movement. We generated $1.3 billion of net inflows in the quarter. Continuing upon its success from last quarter, our ex-state-owned strategy products generated $1.5 billion of inflows. Also continuing its strong trend, we had inflows of $648 million into our thematic products encompassing cloud computing, artificial intelligence, battery solutions, and our newly launched cybersecurity ETFs. The AUM and our thematic ETFs have now grown 20% to $2.6 billion at the end of the quarter. Our European-listed Bitcoin Fund took in $36 million in the quarter and now stands at just under $400 million in AUM, doubling in size since the beginning of the year. On the commodity side, we saw some mixed results as we experienced strength in our silver and other precious metal products, which were offset by outflows in gold and oil due to negative market sentiment. Looking at Q2 so far, the strong momentum continues. And we have now raised over $200 million, bringing our AUM to near $73 billion. Now turning to our financial results on Slide 3. Revenues increased 9% to $73 million for the quarter due to higher average AUM from our strong inflows. Adjusted net income was $12.5 million or $0.08 a share, up 36% from the fourth quarter. This quarter, we took a noncash after-tax gain of $2.8 million for our future gold commitment payments and $200,000 in other nonoperating items. Turning to margins on the next slide. Our operating margin expanded to 25.5%, reflecting higher average AUM and a flat expense quarter-over-quarter. Gross margins also increased to 78.7% in the quarter. Along with higher average AUM this quarter, the fourth quarter of last year reflected costs for rebalancing on our U.S.-listed products as well as the final Brexit-related expenses for our European-listed products. There is no change to our guidance of 77% to 78% gross margins for the full year, but we will have fluctuations intra-quarter. On the next slide, you can see the change in our expenses. Our operating expenses were essentially flat at $54 million. Compensation costs increased due to the seasonally higher payroll taxes and headcount-related costs. Based on our strong results so far this quarter, we anticipate full-year compensation costs to be at the high end of our $75 million to $85 million guidance range. We also incurred higher product development costs related to our digital asset initiative, offset by lower marketing and sales-related spending and fund costs that I referred to on the previous slide. Our gold's royalty payments declined due to lower gold prices, and we exited our London lease. Our discretionary spending remained well controlled at $10.5 million this quarter, and our full-year guidance remains at approximately $49 million for the full year. Thank you. I'd now like to turn the call over to Jarrett.

Thank you, Amit. Last quarter, I outlined some of the key focus areas for 2021. I talked about accelerating our momentum through targeted investments in both today's growth and tomorrow's. I talked about continued progress with our model portfolio offering. I talked about new global product launches with a focus on core, tactical, thematic and ESG exposures. I talked about maintaining our leadership position in crypto ETPs while also establishing ourselves as a leader in digital assets and how this last initiative holds the promise for WisdomTree to tap additional revenue streams, further accelerating organic growth in what we see as the next chapter in financial services. As our Q1 results make clear, we are executing well on all fronts. We have momentum and are generating strong organic growth. Overall, top line growth led to a very strong all around quarter with inflows driving record AUM and strong revenues and expanding operating margins and net income. Our team remains focused and dedicated to strong execution. This and the breadth and diversified mix of our business gives us confidence that our momentum will continue. Regarding organic growth, we are enthusiastic about global flows, industry-driven gold outflows notwithstanding. We have the broadest range of gold ETCs available, and our success in industrial metals, copper and silver shows that there is a wider opportunity for us to capture. Further, thematics have been a strong success, where we strive for differentiated and thoughtful exposures through a combination of our internal research and collaboration with deep subject matter experts. Our thematic suite, including cloud computing, artificial intelligence, battery technology and cybersecurity saw strong inflows across both our U.S. and European platforms. In the U.S., our model portfolio initiative also continues to stand out. We are converting on previously announced successes like our third-party model mandate with Merrill and through collaborations, such as tax-smart portfolios with 55ip. In the first quarter, we launched our Model Adoption Center, the MAC, which provides holistic support and solutions for advisers to leverage our portfolio analytics and investment capabilities for their end clients. Overall, our model portfolio initiative is gaining more traction and is facilitating deeper client relationships, larger client relationships, and stickier and more diversified flows. In the coming quarters, we anticipate announcing additional major model partnerships and leveraging additional collaborations, such as our recently discussed relationship with Onramp Invest, a financial technology start-up, which will allow us to incorporate crypto assets into RIA workflows and into our models for RIAs. In terms of mix and breadth, our emerging markets ex-state-owned enterprise fund, XSOE, was a Q1 star with its sister ex-state-owned China fund, CSXE, also contributing. Following the implementation of additional ESG screens during the quarter, we're excited about our strong position in the strategically important categories of both emerging markets and ESG investing. But the quarter was really marked by the overall diversity and breadth of our flows. In the U.S., a growing percentage of our funds are seeing inflows, while a declining percentage of our funds are seeing outflows. Further, a third of our U.S. funds hit new all-time AUM highs, and globally, we now have 32 funds with AUM over $500 million and 20 over $1 billion. This diversity and breadth is fueling our momentum, where including April, the U.S. now has 10 consecutive months of inflows, the best such streak in 6 years. In Europe, we're building on 2 consecutive years of record organic growth. And in April, we're also seeing positive flows. Group run rate revenue based on current AUM levels is now at $300 million, up nearly 40% from the first quarter of last year, and this breadth and healthy mix is also showing up in fees where our fee captures remained steady and is actually up from Q4 levels. Our strong product pipeline further adds to this mix and diversity and represents yet another element of our increasing momentum. We continue to advance the robustness of our existing fixed income and commodities offerings as well as adding additional new products in thematics and growth equities. In the cryptocurrency space, earlier this month, we cross-listed our European domiciled Bitcoin ETP, BTCW, in Germany, allowing for a wider audience to have easy access, which should help accelerate growth. And just yesterday, we launched a physically backed Ethereum ETP, ETHW. And last month in the U.S., we filed for the WisdomTree Bitcoin Trust. All in all, we are delivering against our plan to drive growth, both today's and tomorrow's, and the results are shining through. And with that, I will hand it over to Jono to speak more about our larger digital assets initiatives, along with his concluding thoughts on the quarter.

Thank you, Jarrett. The takeaways from this quarter are simple: continued growth and momentum with $1.4 billion in year-to-date flows and strong execution. As I've said before, WisdomTree is operating with even greater speed, efficiency, and inclusion in our new remote-first orientation. Our results are clear evidence of this. While we remain laser-focused on the opportunities in front of us today, we are equally focused on the future. The product activity Jarrett reviewed in Bitcoin and Ethereum, along with our collaboration with Onramp Invest, a financial technology start-up focused on integrating crypto assets into RIA model portfolios, continues and further advances our efforts to support more mainstream adoption of these exposures in transparent and highly-regulated investor-friendly formats. However, our vision for digital assets expands beyond ETPs. Following our strategic investment in Securrency, a company focused on blockchain-based financial and regulatory technology, we participated in their $30 million Series B investment round, along with global financial service leaders, including State Street, U.S. Bank and Abu Dhabi Catalyst Partners. This financing was completed earlier this week. This is an important milestone for Securrency, and we are excited about the future opportunities to leverage Securrency's technology. We have been consistent and clear in our belief that regulated digital assets and blockchain will have an important role in capital markets, fund management, and financial services broadly going forward. We continue working with Securrency on innovations in these areas, as demonstrated by our recent filing for a blockchain-enabled digital short-term treasury fund. Crypto assets and blockchain have been one of the biggest stories in financial services in 2021. While some might have asked if we were too early in our investments over the past few years, I feel we have made these investments in time to be strategically well positioned in this fast-developing environment. We know crypto and blockchain are top of mind for our clients, and we want to continue to help them to understand and navigate this space. As our Bitcoin and Ethereum ETPs as well as our model portfolio initiative demonstrates, these efforts are very much supportive of our broader fund platform. And we think these investments will continue to drive organic growth in the future. Finally, before I open the call to questions, I want to acknowledge our CFO, Amit Muni, who has decided to move on to another opportunity at the end of May. Amit first came to WisdomTree to lead WisdomTree's relisting on NASDAQ and has been a valuable member of the management team throughout his 13 years of service. Amit built up a strong finance function and has developed a stellar team. He leaves WisdomTree in a position of strength, and we wish him well in his future endeavors. Thank you, Amit. Now let's open up the call to Q&A.

Our first question comes from Craig Siegenthaler with Credit Suisse.

I just wanted to see if you could walk us through the time line for your U.S. Bitcoin and tokenized gold product launches and regulatory approvals?

Thank you, Craig. So first with our U.S. Bitcoin filing, there's not much that we can say. But we feel like, first, let's jump to the sort of the punch line. We expect to either be first or amongst the very first when they do get approved. I would say that the VanEck filing being delayed, WisdomTree was the clear winner in that, but it's hard to say exactly when they will be approved. But again, particularly because of the new leadership at the SEC, it is moving forward. We're getting good interactions with the regulators. And we're optimistic that, again, we'll either be first or amongst the first. On gold, it's still positioned for later, gold tokens later, hopefully, before the end of the year. We're working very hard on that. As you can also see, we've also filed for a blockchain-enabled treasury fund. So within that space of crypto, blockchain digital assets, it was a very, very busy year-to-date or quarter. That's as much as I can say, though, Craig, in light of where we are with the regulators.

Understand, Jono. And Jono, just as my follow-up, can you help us think about the advantages to owning bitcoin inside of an ETF wrapper relative to owning it directly at a crypto exchange?

The ETF was designed to simplify access to trading, making it easier to invest in crypto. We're expanding our efforts in Europe, particularly with our Bitcoin ETP, which has recently moved into Germany and selective retail. Our opportunities this quarter have significantly increased. However, many individuals, including institutional investors, are hesitant to open wallets for crypto. Buying crypto directly through a wallet poses risks, as it can easily be lost. For many investors, the safer option is purchasing it through a protected wrapper that offers insurance and custody, which is likely to be the preferred method in the current market environment.

Our next question comes from Dan Fannon with Jefferies.

This is actually James Steele on for Dan. So I just have one. Looking at the success you've had with your thematic products, I just hope to get some color on which clients or which channels are most receptive to these. And ultimately trying to get an idea of what the stickiness of these flows might be.

Thank you, James. Jeremy, do you mind taking that?

Sure, I'll begin there. What's exciting is the wide range of our thematic success. Amit mentioned that it's not limited to a single product; it spans across various platforms including cloud computing, AI, and battery solutions. We're observing this success throughout our offerings. I believe it's a mix of strategies that many retailers are interested in, while advisors aim to stay at the forefront of technology by incorporating them into model portfolios. WisdomTree has launched model portfolios that feature what we call a disruptive growth model, which combines different themes, and we notice that people are adding this as a complement to their core exposure. While thematic products have proven to be appealing for retail, we also see advisor adoption. Our success stems from exceptionally strong unique performance. If we consider the cloud computing sector, although we were not the first fund in this space, we always emphasize that we won't just create a me-too product. However, in this category, there are a few large funds with billions in assets. Over the past six months, we've captured over 100% of the inflows to cloud computing, which I attribute to the strong performance that is resonating with the entire community.

And just jumping on top, this is Jarrett, reiterating on the channels. It's all channels, retail advisers, but it's U.S. and Europe. And so we also have a lot of institutional interest as well. And on the stickiness, you can refer to them as thematics, but they're becoming more core holdings as part of portfolio and model approaches. So the stickiness is actually pretty good. So all channels and our expectation is sticky assets.

Next question comes from Robert Lee with KBW.

This is Jeff Drezner standing in for Rob Lee. My first question is about the blockchain you mentioned concerning the treasury assets. I'm interested in how it benefits the short-term treasury funds and what it enables.

I’m somewhat restricted in what I can disclose, but we have submitted a filing for a digital treasury fund that will utilize blockchain technology. This initiative is based on our partnership with Securrency, whose technology is vital for advancing the 40 Act and the open-ended fund structure. We have consistently stated our commitment to enhancing the investing experience, and we plan to introduce features such as peer-to-peer transfers, interoperability between Ethereum and Stellar blockchains, and overall improved efficiency. These enhancements represent some of the innovative functionalities we anticipate from this cutting-edge filing, which is among the most advanced in the market globally.

Great. And if I can just follow-up. Just considering the excitement around the crypto, are you surprised at the demand for the Bitcoin ETF in Europe? It's been good, but maybe a bit more modest. And what maybe you would attribute that to?

Earlier in the year, we experienced some profit-taking, which put us in a negative position at the start. However, in the last couple of quarters, we've seen stronger growth. Institutions are exploring their entry points and examining the structure more closely. I want to emphasize that expanding into Germany with a broader mandate that includes selective retail opportunities significantly enhances our potential going forward. I believe we have greatly increased our opportunity set, and I anticipate faster and more substantial growth if investor sentiment remains positive.

Great. If I could just get one more quick one. In terms of model portfolios, can you maybe update us on the progress as we're a quarter into 2021, mentioned on the last call that you expect meaningful flows during the year?

Jarrett, do you want to take the first answer and maybe with Jeremy, but at least...

The model initiative has been a long-term project for us. It's a comprehensive approach that involved developing investment capabilities and assembling our team. We also focused on creating content and building tools. Our main goal with models is to eliminate barriers to adoption and facilitate the shift toward using models. They continue to represent a major trend in wealth management, and more wealth managers are increasingly adopting them. We have been partners in this journey from the beginning, and we're gaining more traction each quarter. Last year, we announced a significant advancement with our partnership with Merrill, integrating our models into their third-party model platform. We have other important developments lined up that we will reveal in the coming quarters. We are making progress step-by-step with each partnership we establish. While we aren't sharing specific numbers at this time, I can confirm that we are building momentum and are excited about the progress we've made with this initiative since the start of the year.

Jeremy, maybe sort of tying together the last couple of questions around digital assets and to models, maybe you could talk a little bit about the partnership with Onramp?

Yes, I'd love to. We certainly see the traditional assets, like income-oriented models, as people need income, which is a key focus for us. We are actively working on multi-asset income models. There's been significant interest in how to gain exposure to Bitcoin and Ether, and this has been challenging due to the lack of approved structures. Onramp will provide direct exposure to these assets while helping advisers connect various systems, from custodians to workflow and portfolio management. We've discussed a new initiative involving several models, including our core equity and fixed income with direct Bitcoin exposure. We're also excited about a disruptive growth model that includes crypto, potentially combining Bitcoin and Ether in a thematic approach. You will hear more about this soon, as we expect to seed these models shortly and share more details next month. We're thrilled about collaborating with the leadership team at Onramp, led by CEO Tyrone Ross and Co-founder Eric Ervin, who bring a wealth of experience working with advisers in this space.

And just one other thing on there as well. I mean that's one of the really great things about models as they are more relationship-based as a starting point versus being product-based, but they do allow us to tie together what we're doing on the product side, and they really allow us to tie together some of these other large macro themes. I mean, if you think about it, mutual funds to ETFs is a big macro theme and wealth management models, ESG and an emerging one being crypto. And in models, we're able to bring that all together. And so we've got the models, as Jarrett just talked about, that we've launched already. But coming not only models with crypto, but ESG models as well. So models are just a great initiative for us, and they remain a major push for us. And again, doing well so far.

Our next question comes from Michael Cyprys with Morgan Stanley.

Maybe just coming back to the U.S. Bitcoin product that you guys filed for. I was just hoping you could maybe elaborate on the product itself. I think you mentioned it's a trust. How does that differ from other ETFs from a product standpoint? How does it differ from other existing ones that you have seen being filed in the marketplace? I think you had mentioned some others like the VanEck product, how does it differ from that? And how does it differ from your European product that you already have in the marketplace?

Really, we're building off of our European product. And again, these are early days. And so not all exposures and filings are created equally. I think we really have answered all of the concerns that regulators have. We're showing how well it works in Europe and bringing sort of what we believe to be best constructed, best practices, and best execution in structuring in Europe really, which means at the moment in the world, we're bringing that expertise and similar structure here to the United States. I don't want to go into really the differences that we are aware of for competitive reasons, but we're very optimistic that our filing will be amongst the first, if not the first approved in the U.S.

And then maybe just on the European side, you had mentioned the cross-listing of your European Bitcoin product and that you might be able to get retail investors on board. I guess, maybe you could just talk a little bit about your distribution strategy, how many platforms is this product going to be available on and what's the sort of limitations around retail being able to buy and participate in this product in Germany and also more broadly around Europe?

Expanding into Germany allows us to enter all of Europe. The product is definitely institutional, and we're experiencing a longer sales cycle compared to retail. We're developing a substantial pipeline of interested institutional investors. Additionally, with our recent expansion into Germany, we have gained more flexibility with retail investors, whether they discover the fund independently or with their adviser’s support. Retail investors can now purchase our funds, which broadens the opportunities compared to when we initially launched in Switzerland. The approach is tailored to different institutions, some of which are accepting crypto while others are not. The increase in the quality and quantity of our discussions indicates that the platforms are becoming more accessible, and there is genuine investor interest. This is not surprising considering the early days of ETFs; Bitcoin is to blockchain what the initial cues were for the ETF structure, attracting considerable attention. The strong performance in this asset class is hard to overlook. We're not suggesting that all investment should be directed here; we aim to provide a balanced view. We have numerous exposures, and while this asset class has performed exceptionally well, we are pleased to facilitate investor access to these investments. This aligns with the foundation on which we established our business and represents continuity rather than a shift in direction.

Great. Are there any additional actions you might be able to take to help broaden the access to retail ownership of the product in Europe? Or is this pretty much it at this point?

I believe that over time, as Bitcoin and crypto assets receive more regulatory approvals and become more accepted in the marketplace, they will continue to progress and become more accessible. I'm attempting to be clear in my response, but retail investors can now purchase our European crypto ETPs.

Our next question comes from Brennan Hawken with UBS.

I have a few more thoughts on crypto and some of these offerings. It's an exciting part of the market, and you all seem to be very engaged here. I'm curious, Jono, you mentioned the third-party custody of crypto assets as a key advantage for the ETFs, which makes sense on the surface. However, I'm interested in understanding what the custody of a blockchain-based asset entails. When you interact with different providers and custodians, is there a significant variation in their capabilities and services? Who stands out in this area, and how have you chosen your custodial partners, along with the reasoning behind those choices?

We started with Swissquote, a key vendor for us in custody of crypto assets, known for its quality and thorough research. Recently, we added Coinbase as a second custodian for these assets. There's a well-known story about someone losing their password and consequently losing $100 million, which highlights the different methods of holding assets. We've recognized that ETFs and ETPs have become mainstream and offer great efficiency, with investors feeling comfortable accessing exposure through this mechanism. This approach alleviates concerns many mainstream investors have about managing their own wallets. Our team has dedicated years to understanding the ecosystem and has implemented high standards to bring these exposures to the market. Investors can trust WisdomTree to safeguard their money, and trust will play a vital role in attracting investors to these options. However, not all vendors in this space are equal, and expertise is crucial for analyzing them, which we possess.

Yes, I completely understand, which is why I wanted to hear your perspective on it. Is the custody of these assets simply a matter of having a third party manage the keys and passwords, along with implementing various control procedures? The challenging aspect is that these are not like standard securities, even though they are being placed into the ETF structure, which I agree should enhance investor confidence. I'm just trying to grasp how this would function mechanically.

We should follow up offline on this. But if you buy the ETP, you don't have to manage your key. It's all done. We do it all for you. I think that's the importance here, is that we're providing the insurance. We're providing the custody management, the key management, the safety of it. So those are the things that will expand broad usage to these exposures. But we can follow up in more detail if you really want to dig in after the call.

That's great. I'd love to learn more. And then switching to a more mundane topic. When we think about the year, and there's an expectation that with vaccine rollouts being as successful as they've been, T&E is going to start to come back. Is that your expectation? Is that embedded in your forward look for expenses? What lines did the T&E tend to flow through? And how should we think about an expense ramp as we go from here into the back half of 2021, and then probably building into 2022?

Amit, maybe you go first, and Jarrett, if he doesn't hit on everything or you have more to add, please do.

All our spending related to travel and entertainment is included in the sales and business development line. The guidance we provided at the beginning of the year anticipated some level of activity increasing in the second half. I wouldn't say it will return to normal, but there will be a slight increase. We will continue to utilize the efficiencies we learned during remote work. We'll need to wait and see if things start returning to normal; if they do, we may need to reassess our approach. However, we have accounted for some additional spending in the latter half of the year, while primarily focusing on leveraging the efficiencies we have gained from operating remotely.

Yes. And just adding a little color. I mean, in our own side of the table running WisdomTree, we found that remote-first really suits us and that even when we can go back, we're looking to go back in a different way, in a remote-first way. And that costs us less money, and it's more efficient. And we've experienced it for a year, and we see so many positives that we want to hold on to. And then when I'm speaking to a lot of our clients and the senior executives at those firms, they're thinking the same thing, that a lot of this has been better. So I don't think we'll be rushing back to 2019, the old way. I agree with Amit that you have to wait and see a little bit because we're all feeling our way. But our expectation is that there is a new and better way, and that's what's in store for us. And it's more efficient, and part of that efficiency is that it costs everybody less money.

Our next question comes from Mike Carrier with Bank of America.

This is Shaun Calnan on for Mike. So just piggybacking off the earlier question on thematics. Can you guys talk about some of the new thematic products on the horizon beyond crypto? Are there going to be any additional ESG products? Or can we expect an infrastructure-related product to be launched?

Jeremy, why don't you go first, but be careful about what you say because of competitive advantages.

Yes, I think you should refer to our filings for the latest information. The clear trend is that we are becoming more of a global organization, particularly in thematics. For instance, our cloud computing initiative launched in September 2019 has now reached approximately $1.89 billion globally, and we are aiming to expand on that. We are examining our offerings in Europe and how we can integrate our strengths. We both launched our cybersecurity products on the same day and have made a strong start. Our team in Europe has also found notable success in AI, battery solutions, and more. I expect that we will collaborate further on these disruptive technologies alongside interesting partners, so you can definitely expect to see more from us.

Okay. And then the gross margin trends have been solid, even looking past the Q4 items. So can you just explain what's driving it? Is it simply scale or are there other factors contributing?

Amit?

Yes. Shaun, it's a factor, as you mentioned. We had lower expenses this quarter because of some seasonal stuff that happened in Q4 of last year, but also the higher average AUM. That helped contribute to the increase in the gross margins. But remember, we're still keeping the full-year guidance at $77 billion to $78 billion because we do have some seasonality intra-quarter when we have rebalances, when we continue to launch funds. So we still feel comfortable with that full-year $77 billion to $78 billion.

But I will remind you that we're up to $73 billion of AUM. So the quarter ended at $69.5 billion. So higher AUM. Keep going.

Our next question comes from Ryan Bailey with Goldman Sachs.

First, I just wanted to start by wishing Amit well in his next endeavor. Then I was hoping to continue along the lines of Brennan's questions. So you mentioned that State Street took part in the recent funding round for Securrency. And I think in general, we're seeing more interest from the trust banks in finding ways to make digital assets mainstream and that's kind of beyond just some of the crypto. So I was wondering if you could speak to what WisdomTree's competitive advantage will be, both some of the larger more entrenched plays in the financial system? When it comes to digital assets specifically, and it sounds like it's beyond sort of being first to market with products, but maybe it's not. So I was wondering if we could stop there, and the second part would just be how WisdomTree will get its fair share of economics from digital asset growth?

That's a great question. We were very early as the lead investor in the Series A for Securrency and remain the largest shareholder following the Series B. The high quality of institutional participation shows that custody banks and other financial institutions are positioning themselves for a blockchain-oriented future, which has significant global potential for efficiency and functionality. By entering the market with regulated tokens at such an early stage, we have a strong opportunity to disintermediate other participants, taking advantage of being a first mover, benefiting from network effects, and through our investment in Securrency, which is increasingly being accepted in their vision for the future. We recognize that this will be disruptive not only in fund management but across financial services, and we expect to see increased economic benefits from these efforts over time. However, I cannot provide more details today.

Understood. If I could try a follow-up. And to your point, this sort of infringes on competitive dynamics. I can follow up with you separately or I can wait. I guess just wondering, in terms of economics to WisdomTree, the primary basis for that will be through the ownership in Securrency?

No, I don't believe so. I think the funding round B was a significant improvement in valuation. However, what I mentioned was separate from the investment in Securrency. And it was very kind of you to say something nice about Amit.

Thank you, Ryan.

Our next question comes from Keith Housum with Northcoast Research.

I am trying to understand the recent Bitcoin filing in the U.S. I know that several other providers have also submitted filings. What are your thoughts on whether the market is large enough for multiple players to succeed? Do you believe your experience in Europe gives you an advantage that some competitors may lack? Any insights you can share would be appreciated.

First of all, Bitcoin represents around a $2 trillion market with very little involvement from institutional and mainstream investors due to the challenges in accessing it. I believe there is significant potential for ETPs to grow substantially. Our organization has a strong focus on crypto, blockchain, and digital assets, which gives us unique insights and knowledge that extends across our teams in Europe and the United States. This provides us with distinct advantages. I am optimistic that our filing will be well received by regulators, and we hope to be among the first, if not the first, to receive approval in the U.S.

Okay. Appreciate it. And then, if I could just revisit a previous question in terms of the gross margins. Obviously, a great quarter for gross margins. Each asset is up even more extensively than. With your guidance, it looks like your fund administration costs would ramp up quite a bit throughout the year so I guess, come back down in that margin. Was there anything in this quarter that suggested the number this quarter was lower than what we'd expect for the rest of the year?

No. One of the things we mentioned was our plan for product launches. This year, we are aiming for about 20 product launches, which will impact gross margins. That’s why we're allowing for some flexibility. We continue to believe that the range of 77% to 78% is still appropriate. In the U.S., it typically costs about $135,000 to launch an ETF, and our European UCITS funds are about the same. For leveraged and inverse funds, the cost is significantly lower, around $30,000 to $40,000.

I'm showing no further questions in queue at this time. I'd like to turn the call back to Jonathan Steinberg for closing remarks.

Thank you, everybody, for your time and attention today, and we'll speak to you next quarter. Have a great day. Bye-bye, everybody.

This concludes today's conference call. Thank you for participating. You may now disconnect.